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Prisoners Dilemma

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The topic of my thesis, I chose the issue of non-cooperative economic games, specifically the so-called “Prisoner’s Dilemma”. Game theory falls in microeconomics and therefore mainly in the economic analysis. It gives us an analysis of the way in which two or more entities interact, choose strategies that simultaneously influence each actor. The greatest credit for the development of economic games have mathematician John von Neumann.

Game theory can be used both to analyze the market, for example, to study the tariff policies of individual countries.

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In general, the “Prisoner’s Dilemma” and other economic game also described as V of experimental economics. Description Prisoner’s Dilemma is one of the most famous economic game that is presented in a variety of designs. It describes the behavior of the two entities, in our case, two people convicted of a felony they committed. The judge or prosecutor has enough evidence but only to the conviction of lighter crime, which is punishable by one year in prison.

Offers therefore separately to each of the prisoners deal that if he confesses, gets only three months in prison for extenuating circumstances, while the other one you will serve a full 10 years. If both confess, both get 5 years. Neither of the prisoners but not communicating with the other, we do not know how it will proceed accomplice.

In the prisoner’s dilemma, it is primarily a strategy returns. Regardless of what you do Y, X is likely to get a reduced sentence if he confesses. Thus, if both confess, they get logically 5 years. In this situation it is better for both prisoners to follow suit to avoid the 10-year-old prison. Overall, therefore, if the two entities will follow only their own selfish interests still serve a shorter sentence, they get more than they would if they were both silent and selfless. The optimal solution, which leads to the shortest sentence (one year), it is only altruism.

In this mathematical problem, but the main driver of human psyche and selfishness factor. Absolute majority of people would simply nekooperovala because they had no hope that the “adversary / accomplice” would fall selflessness. As an example from his own life would be introduced to what I remember as a small child. When I was little, I shared a room with my brother. We both own and common toys, but each of us prefer a different kind of toys. When we then get good grades in school, we were able to choose a new toy.

The problem occurred in that when we had the toy from. I wanted a doll Babyborn, brother wanted spiraling “spinning top” Beyblade. There were thus various options. Either we could each separately to lie to parents and “blag” your toy, or we could agree to buy something more expensive for both (LEGO), and we agreed and got nothing. Сooperation was then in our case the best possible and most efficient solution.

If we chose a different strategy and selfish interest, neither of us would be satisfied. I can say that finally we our Star Wars LEGO very pleased. Another similar example could be for instance the agreement between the two owners of the house that needs renovation. We are the owner of X and Y. owner can not stand one another, and therefore virtually communicate together (like customs). Both have a savings account (or accounts in general) are quite large sums, which adds value there. If both decide to place a portion of the capital’s rich enough to cover all the costs of enovation. However, since each of them will follow primarily mainly his interest and appreciation of their money, the table with different strategies as follows. From the table we can see that the current situation is for each of them best when opponent renovate and I will not. From a logical point of view this situation but may not occur.

Neither the owners themselves will not want to take the risk to pay big money for the renovation, which will then benefit from the second owner. The most likely is a possibility that in the end neither of them will renovate, which is for them in the current situation might be advantageous, but in the long run it is quite silly. The house will continue to decay and renewal in the future could become several orders of magnitude more than now, because the house is in worse condition. Both owners will also run money, because renovation of the house would be increased rent, which would receive from taxpayers.

Best solution for the future is therefore to both invest some of the money for the renovation of a part can have further capitalize on the account. Cooperation therefore wins again and coming paradigm shift. “Actors produce, produce. Creating new value, something that did not exist before. ” Prisoner’s dilemma in my reasoning can be applied to such a theme, such as commercial and marketing strategy markteringove. As an example I can give of your ad campaign and the development of two large companies of the same kind. Take the two best-known companies in the Czech Republic providing telecommunication services – T-Mobile and Vodafone.

If T-Mobile and Vodafone have hypothetically equal share of the telecommunications market and data tariffs exist for both companies several options strategies. Firms to increase demand for their product, it is best to invest in good advertising and promotion. Both companies should therefore seek to bring their “product” on the market with the highest quality advertising and promotion. If one company will have a bad advertising campaign, or no, is a strong possibility that the customer will go for a better offer and go to a competitor.

Neither of providers thus by logical reasoning will not risk that their advertising would not be the less quality, because both sides will probably invest a lot of money into the best marketing strategy. This case, of course, will not be as profitable and will not be as effective as if invested only one of the providers. Vodafone and T-Mobile but they hope that their ultra new grand campaign to attract more customers such as O2 and thus increase the demand for their product. But the catch is that it is quite a small chance that these revenues would significantly bridge the height of its money invested in advertising campaigns.

Given that the best strategy for a company depends on how the company decides competitive, there is no straightforward and clear winning strategy – in this example, therefore, that the classic “prisoner’s dilemma” a little different.

The effect is however quite identical. Both companies will make more profit out of it when they do Ads invest less than when start moving giant campaign. This means that they will be better off if they “cooperate in the doldrums. “


Finally, I would like to say that non-cooperative economic games, such as the Prisoner’s Dilemma really just fall into microeconomics – analyzed only subjetivni views and behavior of entities, thus has no macroeconomic impact. The consequences may be far-reaching.

Application prisoner’s dilemma can be found both in mathematics, sociology, economics, biology, and in our own ives. People quite often gets into situations where he has to decide only on your own terms, without the cooperation of anyone else. In most cases, the human mind just slips into that solves a dilemma that should act selfishly at the expense of others, or they looked ahead. But right now it is selfishness and rapacity driving force behind all successful people. It is therefore obvious to always decide this. It is this “model” option is characterized as a market economy, as well as the entire ecosystem of the world.


  1. Canik, P. Rezbova, L. – Zavrel, T. : Methods and tools of business ethics. Prague University of Economics, 2006.
  2. Etzioni, A. : The Moral Dimension of the economy. Prague, Victoria Publishing 1995.
  3. Kohak, E. : The green halo. Prague, elephant 1998. Samuleson, PA, Nordhaus, WA: 18. vydani Economics, Prague, Svoboda 2005 http://plato. stanford. edu/entries/prisoner-dilemma/ http://is. muni. cz/th/76604/esf_m/Diplomova_prace. pdf
  4. Dr.. George Chou, MD. , Introduction to Economics lecture material to No. 2

Cite this Prisoners Dilemma

Prisoners Dilemma. (2016, Oct 29). Retrieved from https://graduateway.com/prisoners-dilemma/

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